Pound Australian Dollar Exchange Rate Fluctuates amid Tory Revolt
The Pound Australian Dollar (GBP/AUD) exchange rate is failing to find a clear direction today amid a return to political instability.
At time of writing the GBP/AUD exchange rate is trading around $1.8002, relatively unchanged from this morning’s opening levels.
Pound (GBP) Undermined by Political Instability
The Pound is struggling to find much demand this morning despite the dismantling of the mini-budget.
Newly-appointed Chancellor Jeremy Hunt reassured the markets as he threw Liz Truss’ mini-budget under the bus. However, what is seen as a bold move to calm the markets, it also undermined Truss’ credibility to lead the country.
Confidence continues to plummet for Truss’ leadership. A new poll from Redfield & Wilton shows Labour now taking a 36-point lead over the Conservatives. This points to the largest lead for any political party since October 1997. Continued political uncertainty will likely weigh on the Pound, capping any significant gains from the fiscal reassurances.
Supporting the Pound are reports that the Bank of England (BoE) could be prepared to delay quantitative tightening to bring further market stability. Set to be worth £838bn, the move could settle things after the recent volatile bond markets continue to threaten the UK’s economic stability.
Australian Dollar (AUD) Fluctuates despite Hawkish RBA Minutes
Meanwhile, the Australian Dollar is also struggling to find a clear direction today despite a hawkish RBA.
The release of the Reserve Bank of Australia’s (RBA) minutes from the last monetary policy meeting showed that the central bank still intends to raise interest rates further. Despite the RBA only opting for a lower-than-expected 25bps rate hike, inflationary pressures still pointed to the need for higher interest rates.
RBA Assistant Governor Michele Bullock underpinned the need for further rate hikes, stating that the RBA can move faster than other central banks if need be. She added that the RBA is determined to bring inflation back down to target of 2-3%.
Weighing on the Australian Dollar, however, is ongoing concerns with the health of China’s economy. Key economic data was due to be released this week, including the Q3 GDP report, but has now been delayed. With question marks over the stability of the world’s second largest economy, global recession fears mount.
Staying with China, also piling the pressure on the risk-sensitive ‘Aussie’, is worrying rhetoric in regard to Taiwan. US Secretary of State Antony Blinken warned that China looks to seize Taiwan on a ‘much faster timeline’ than expected.
Pound Australian Dollar Forecast: UK Inflation to Boost the Pound?
Looking ahead, the Pound Australian Dollar exchange rate could see further movement with UK CPI data. Expectations of 10.2%, a fresh high for 2022, could bolster further interest rate hike bets.
Meanwhile, further news out of China could influence the ‘Aussie’. The delaying of GDP data could mean the Chinese economy remains rocky, impacting global market sentiment, and in turn, the Australian Dollar.